USD/CAD Forecast: Slippery oil prices and King Dollar defeat CAD
|- The Canadian Dollar was on the back foot once again.
- A light Canadian calendar keeps the focus on the market mood.
- Canadian dollar seen giving up from now on, although bullish interest decreased when compared to the previous week.
This was the week: Almost all the ingredients for an upside move
Fed Chair Jerome Powell gave a lengthy testimony on Capitol Hill and had a crystal clear message: the economy is doing well. He is satisfied with GDP growth, the job market, accelerated wage growth and rising inflation. The Fed is set to continue raising rates. On trade, he said high tariffs are not suitable for the economy but did not delve further into the topic. The US Dollar strengthened.
The sensitive topic of trade played a critical part in the greenback's rally as well. The US and China exchanged blames on stalled negotiations, and the US Dollar extended its gains. Canada is the most sensitive country to US trade action.
The US Dollar took a small hit from Trump late in the week, when the President called the Fed to lower rates and said a weaker US Dollar is better for the economy. Nverhteless, the broader picture remains positive for the greenback.
Oil prices remained pressured as inventories are awash with the black gold. The slide in petrol prices is not helpful to the Canadian Dollar.
Canadian events: Light calendar, but oil is eyed
The lone event on the Canadian calendar is the Wholesale Sales measure released on Monday. A substantial market reaction is unlikely.
The loonie will, therefore, move primarily to the market mood that is the result of Trump's trade tirades. Any news related to NAFTA will be closely eyed by traders.
So far, stocks have been sanguine, but this cannot last forever. See: Trade War from the Trenches: the dogs bark but the caravan moves on (for now)
Oil will likely play second fiddle, but any fluctuations in Canada's critical export could also make a difference.
Here is the Canadian calendar for this week.
US events: Busy week culminates with Q2 GDP
The week begins with housing data: Existing Home Sales on Monday, Housing Prices on Tuesday, and New Home Sales on Wednesday. All the indicators from the housing sector have been upbeat and steady, and they are likely to remain at satisfactory levels. Sales of existing homes represent the vast majority of transactions while new dwellings trigger more economic activity around them.
The US publishes durable goods orders on Thursday. Apart from the intrinsic importance of the data, this report for June feeds into the GDP report released the next day.
The first release of Q2 GDP is set to rock the US Dollar. The first read triggers the broadest volatility and expectations are high. All indications point to a considerable acceleration in growth after a relatively slow first quarter. Tension may limit movements ahead of the release with price action exploding afterward.
Here are the critical American events from the forex calendar:
USD/CAD Technical Analysis
The pair is in an upwards channel as demonstrated by the thick black lines on the chart. Also, the Relative Strength Index (RSI) and Momentum are pointing higher, and the price is above the 50-day and 200-day Simple Moving Averages.
1.3295 capped the pair on July 19th and is an immediate line of resistance. 1.3350 was a high point in late June and also in 2017. The 2018 peak of 1.3380 is next. Further above, the round number of 1.3500 is of importance.
1.3220 limited the pair's advance in early July. 1.3105 was a low point around the same time. Close by, 1.300 worked as support early in July. Even lower, 1.2950 was a stepping stone on the way up, back in mid-June.
USD/CAD Sentiment
The strength of the US Dollar is set to continue on the Fed´s hawkishness and the strong economy. The Canadian Dollar is set to suffer due to the trade wars and slipping oil prices. All in all, there is more room to the downside for the loonie and the upside for the USD/CAD.
The FXStreet forex poll of experts provides additional insights into the direction fo the pair. Bulls dominate the USD/CAD pair as they did last week, with the FXStreet Forecast poll showing that the pair will advance from here on. In the weekly perspective, the number of those looking for more gain decreased to 64% from 80%, with the average target anyway little changed at the 1.3200 area. In the three months perspective, bulls were aiming to 1.3170 on average, and are now looking for higher targets, as the average now is at 1.3250, probably as a result of falling oil prices, which seem poised to continue.
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